Gold Gains in N.Y. as Dollar Falls Against Euro; Silver Climbs

June 17 (Bloomberg) -- Gold prices advanced in New York as the dollar fell against the euro, boosting demand for the metal as a store of value. Silver also rose.

The U.S. currency weakened after a Labor Department report showed that in May, consumer prices fell the most in 12 months since 1950. The greenback slipped as much as 0.7 percent to trade at $1.3924 per euro from $1.3837 yesterday. Gold prices typically move in the opposite direction of the dollar.

“The U.S. dollar continues to be the story for gold,” Miguel Perez-Santalla, a sales vice president at Heraeus Precious Metals Management in New York, said in a note.

Gold futures for August delivery rose $3.80, or 0.4 percent, to $936 an ounce on the New York Mercantile Exchange’s Comex division. Bullion for immediate delivery in London gained $2.53, or 0.3 percent, to $937.33 at 7:11 p.m. local time.

“The dollar eased against the euro after traders dialed back on expectations of a Fed rate hike -- before year’s end, anyway,” Jon Nadler, a Kitco Inc. senior analyst in Montreal, said in a note.

“The market still holds the potential to test $900,” said Ralph Preston, a Heritage West Futures Inc. commodity analyst in San Diego. “With this morning’s core consumer price index in line with expectations, $928.40 support is currently holding.”

“Inflation hawks hardly have a reason to soar,” Preston said. “With gold up a tad in today’s trade, gold bulls are hardly out of the corral yet.”

U.S. Inflation

Consumers’ cost of living rose 0.1 percent in May, less than the median estimate of analysts surveyed by Bloomberg News. The Labor Department said the consumer price index dropped 1.3 percent in the year ended May 31.

Investors “appear to be looking through the short-term period of deflation risk and are worrying about the prospects for longer-term inflation,” John Reade, UBS AG’s head metals strategist in London, said today in a report. “Should inflation concerns become more consensual, then gold could move a lot higher.”

Gold slipped to $930.50 in the afternoon “fixing” in London, a value used by some mining companies to sell their output, from $933.75 in the morning fixing.

Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, has remained unchanged at 1,132.15 metric tons, where it stood as of June 5, the company’s Web site shows. Gold held in ETF Securities Ltd.’s exchange- traded commodities fell 0.3 percent to 7.644 million ounces yesterday, its Web site shows.

Silver for July delivery gained 15 cents, or 1.1 percent, to $14.28 an ounce in New York. Silver for immediate delivery rose 10.5 cents, or 0.7 percent, to $14.31 an ounce at 7:10 p.m. in London.